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COMMENTARY

5 ways to build loyalty with digitally demanding consumers

In this digital age, customers are more empowered and informed than ever before. They demand better, cheaper and more efficient products and services. The retail banking industry — like all industries — has experienced the effect of these changes, but financial institutions have not adapted as well as some others; the banking industry overall scores below average on customer experience surveys.

CX is an important metric because it has a proven link to future financial performance, loyalty, share of mind, and share of wallet. With new fintech companies providing sharp competition, it is more crucial now than ever that retail banks gain a better understanding of their customers' needs so that they can meet — and exceed — those needs and thus gain their customers' loyalty.

Another important challenge facing retail banks is competition from fintech and other upstart companies. These types of companies face less regulation and fewer barriers, allowing them to offer their services directly to their customers, and these services now include banking, lending, personal finance, payments, investing and home mortgage.

These companies are in direct competition with retail banks and retail banks recognize this: 80 percent of financial organizations think their business is at risk to innovators.

A new approach

What is the solution for retail banks? In short, the true differentiator must be competing on experience. They must simplify and adapt so that they are able to meet the needs of their customers, offering the right services in the right channel at the right time. Many banks have begun reducing the number of branches and are offering more services online. Other banks are vowing to keep branches open while expanding digital offering as much as possible. Which approach is the right approach?

There is no question that digital is more important to banks than ever. Nevertheless, retail banks cannot overcommit to digital channels at the expense of their branch locations, because — even with the widespread use of online and mobile banking — customers still rank branch locations as the fourth most important part of any banking experience, behind online and mobile functionally, low or no fees, and safety.

In a world where the consumer is increasingly in control, competing on the experience is the solution. Retail banks must therefore create and implement a detailed strategy of how they can improve their CX scores and create loyal, satisfied customers. Below are five simple steps that retail banks can use to move forward when it comes to customer experience.

Step 1: Measure customer experience — everywhere

More than simply gathering feedback, the first step requires turning qualitative voice of customer data into a quantitative measurement of the customer experience. Every interaction where a customer interacts with a bank presents both a risk and an opportunity based on your ability to meet the needs and exceed the expectations of the customer. Those experiences, whether online, in a branch, at an ATM, or over the phone, should be measured and managed.

Step 2: Enrich segmentation analysis

Understanding where the customer is in the lifecycle of being a banking customer is fundamentally important. Why do different groups of customers behave the way they do? What needs do customers have at different stages of the customer lifecycle? Which channel do different segments use for different services, and why?

Step 3: Next best action

Now you can use all the information and analysis to begin meeting your customers' needs by delivering the right capabilities, offerings, and the right message, to the right segment, at the right time, using the right channel and touchpoint. The goal here is to prioritize improvement efforts in every channel based on their ability to drive satisfaction, loyalty, retention, and share of wallet.

Step 4: Optimize the journey

Optimize the customer journey by understanding how digital experiences contribute to actions in other touchpoints (and vice versa), why customers abandon, the role of branches in a modern customer's experience, and the critical interplay of various experiences at different touchpoints.

Step 5: Grow earned loyalty

While many customers may stick with their bank because of convenience or switching costs, too often banks find themselves competing for additional business by offering the best rates or the lowest fees. When delivering superior customer experiences is a priority, the competitive dynamic changes. Highly satisfied customers become more brand conscious and less price or rate conscious. True customer loyalty is earned by delivering great experiences.

A unique opportunity

One of retail banks' distinct advantages is that they are supporting customers through some of life's most memorable milestones, from opening one's first bank account or credit card, to buying a car, to purchasing a home.

Beyond simply facilitating transactions, this is where retail banks can really shine, providing services that are not only needed and relevant, but also thoughtful and personal. Delivering great customer experiences will, in turn, create loyal customers because when done right it has been shown time and time again to be predictive of revenue, retention, loyalty, and market share.

In other words, a bank can use good customer experiences to drive acquisition and to create allegiance, moving customers from simply being retained to being loyal.

Jason Conrad is vice president at ForeSee (www.foresee.com) and the author of a forthcoming study on retail banking CX. ForeSee provides CX solutions for eight of the 10 top banks in the U.S.